Please ensure Javascript is enabled for purposes of website accessibility

3.14 Easy Ways to Retire a Millionaire

By Katie Brockman - Mar 14, 2021 at 6:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Get your retirement savings on track this Pi Day.

March 14 is National Pi Day, when math nerds take center stage. There's also no better time to get your finances on track.

Retiring a millionaire is within reach for many investors, even if you're not already wealthy. You don't necessarily need to save a lot each month to reach millionaire status, but you'll need the right strategy.

In honor of Pi Day, there are endless ways to save more for retirement (see what we did there?). And these 3(.14) strategies can put you on the path to becoming a millionaire.

Pi symbol baked onto a pie

Image source: Getty Images.

1. Start saving early

When time is on your side, it becomes significantly easier to save a lot of money. For example, say you began saving at age 20 with a goal of reaching $1 million in savings by age 67. If you were earning an 8% annual return on your investments, you'd need to save just under $200 per month to reach your goal. On the other hand, if you waited until age 40 to begin saving, you'd need to sock away around $1,000 per month, all other factors remaining the same.

This doesn't mean that you can't retire a millionaire if you're off to a late start. But it's better to start investing now rather than putting it off. The longer you wait to begin, the more you'll need to save each month to catch up.

2. Save consistently

Saving consistently can help you build a robust retirement fund. When you save a little each month, it's easier to build saving into your budget. You know you're going to invest a certain amount month after month, so saving becomes a priority rather than an afterthought.

In addition, this strategy can make saving easier on your wallet. Saving $100 per month often feels more manageable than saving $1,200 once a year, for example, even though they amount to the same thing. And when it feels easier to save, you're more likely to stick to your plan.

3. Avoid taking retirement account withdrawals

When money is tight and you're faced with an unexpected expense, it may be tempting to pull the cash from your retirement fund. However, even relatively small withdrawals can make it much more challenging to reach your million-dollar goal.

Say, for instance, you have $100,000 saved in your 401(k) and you're earning an 8% annual rate of return on your investments. Let's also say you're considering making a one-time $5,000 withdrawal. Here's how much you'd have saved over time, assuming in either scenario you're not making any additional contributions.

Number of Years Total Savings After Taking a $5,000 Withdrawal Total Savings Without Taking a $5,000 Withdrawal
0 (Today) $95,000 $100,000
5 $139,600 $147,000
10 $205,100 $215,900
20 $442,800 $466,100
30 $956,000 $1,006,300

Source: Author's calculations.

In this scenario, that single $5,000 withdrawal could result in more than $50,000 in missed potential earnings. If you were to make repeated withdrawals over the years, you could miss out on even more.

.14. Earn employer-matching contributions

Finally, one way to boost your savings that requires no effort on your part is by earning matching 401(k) contributions. These are essentially free money. You simply save in your 401(k), and your employer will match your savings up to a set amount.

For example, if you're earning $60,000 per year and your employer will match your contributions up to 3% of your salary, that's $1,800 per year from your employer. Try your best to at least contribute enough to your 401(k) to earn the full match. Otherwise, you're leaving money on the table.

You don't need to be rich or a stock market guru to be able to retire wealthy. Warren Buffett once said that, "The most important quality for an investor is temperament, not intellect." With patience and the right strategy, it's easier than you think to retire a millionaire.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.